MPs' pension scheme should be scrapped in favour of flexible benefits, says CIPD
David Woods, July 17, 2009
MPs' final salary pension scheme must be removed because it is ineffective in recruiting and retaining talented staff and takes unnecessary risk with taxpayers' money, according to the CIPD.
The CIPD told the Senior Salaries Review Body consultation on the review of MPs’ pensions that the current pension arrangement should be replaced with a flexible benefits scheme where MPs would receive an account (fixed as a percentage of their salary) that they could then use to contribute to a personal pension, purchase other benefits or take the amount as cash and invest it in other financial products.
Charles Cotton, reward adviser at the CIPD, believes this arrangement should be adopted by the Scottish Parliament and the Assemblies in Wales and Northern Ireland.
He said: "The CIPD believes such an approach can help support the recruitment and retention of individuals from a wider talent pool, by offering choice and putting pensions at the heart of a total reward strategy. This will help create a parliament that reflects the society it purports to represent.
"Such an approach would also lead to more transparency over how, and how much, parliamentarians are being remunerated, so taxpayers would know the total pay costs of their MPs."
But the CIPD claims if the final salary scheme is to be retained it should be made more affordable by increasing MPs contribution, reducing the accrual rate, capping the pensionable salary, removing the option to buy added years, removing the option to transfer in benefits accrued in another pension, increasing the normal retirement age and reducing the pension for early retirement.